SAP BLOG Introduction to Universal Parallel Accounting

This blog intends to provide a good overview and the motivation behind the new method of parallel accounting in SAP, called as Universal Parallel Accounting (UPA)

Parallel Accounting is one of the key features and strengths of SAP Financial Accounting solution. Typically, there are three possible approaches to Parallel Accounting in SAP today, although the first one is almost a non-existent solution, hardly used by anyone

• Parallel Accounting using Company Code approach i.e. duplicate company codes to post accounting adjustments
• Parallel Accounting using Accounts approach (good, but not scalable beyond a point)
• Parallel Accounting using Leger approach (recommended)

Let’s take it a bit deeper now. How is the parallel accounting enabled in SAP today ? The following picture (Image Courtesy: SAP) gives a quick insight into this

• Parallel Accounting in Fixed Assets is enabled by Depreciation Area
• Parallel Accounting in General Ledger is enabled by Ledger
• Parallel Accounting in Inventory Valuation is enabled by Currency Type (Legal / Group View)
• Parallel Accounting in Controlling is enabled by Versions

Different Approaches to Parallel Accounting in each Solution​

Thus, we can conclude that there was no one consistent approach to parallel accounting & reporting. Each solution area evolved its own approach which was subsequently integrated with accounting in some way.

While this served the purpose of Parallel Accounting to a great extent (for external reporting), the greatness of the solution looks not-so-great when it is put to the litmus test of management accounting. Amounts posted to the leading ledger, by and large, drive the management accounting as well

The following picture (Image Courtesy: SAP) explains the extent to which the existing solution passes the litmus test in Management Accounting.

What works well ?

• Depreciation can be very well posted to each ledger independently
• The same holds good for expense allocation, if you use the new Universal Allocation feature of S/4 HANA

What Works not-so-well ?

• When you settle a WBS Element to a Fixed Asset, you end up settling it to both the ledgers. What if you want to capitalize the asset in only one accounting principle ? The solution does not allow you to settle by Ledger
• Goods issued from inventory to production order posts the same cost of consumption to both ledgers
• The activity costs posted to the production order can’t be differentiated by ledger, since KP26 does not allow you to maintain two different prices by ledger and only one version (usually Version 0) is integrated with Financial Accounting
• Goods receipt from production order uses the same inventory valuation price for both the ledgers, since CK11N does not allow you to maintain different standard price by ledger
• Variances only from one Controlling Version (version 0) can be settled to Margin Analysis a.k.a. Profitability Analysis

Parallel Accounting: When and Where in Management Accounting​

OK, Agreed ! There are some challenges with the existing solution in terms of Management Accounting. But why the sudden change now ? What is the motivation driving SAP to introduce a new re-imagined Universal Parallel Accounting solution. The answer lies in the following:

• A harmonized approach (like the same thread running across all the beads) to parallel accounting across various financial solutions will not only address the above challenges but also provide a robust platform for all future innovations
• Global organizations need end-to-end visibility of value chain to make the right decision and steer the right corporate structure (Refer this video by SAP to learn more about Value Chain Analysis)
• The upcoming carbon accounting / reporting requirements makes it necessary to reimagine the accounting solution. The UPA provides the foundational platform for the same

So, how does UPA address the challenges posed by the existing parallel accounting solution ? The following picture (Image Courtesy: SAP) gives a quick insight into the same, where you can see that every value flow, right from beginning till the end, is driven by ledger. The applicable best practice scope items are also highlighted in the picture

Universal Parallel Accounting Approach​

As a result of the new harmonized approach to parallel accounting, we will see the following key changes (if one chooses to activate the UPA):

• The central currency and ledger configuration (FINSC_LEDGER) will drive the parallel accounting across Finance, Asset Accounting, Controlling, Inventory Accounting, etc.
• All 10 currencies will be integrated in all the solutions such as Asset Accounting, Material Ledger, etc.
• The ML Type configuration where you declare the currency types to be used will become obsolete
• Several Fixed Asset accounting configurations such as group currency take over of APC values, depreciation terms, etc, will become obsolete
• Inventory price can be maintained by ledger
• Costing Variants will need to be created by ledger
• Activity prices can be maintained by ledger
• Standard Cost Estimates by ledger
• Variance calculation and settlement by ledger
• WIP / Results Analysis will be real-time using Event Based Production Accounting
• Actual Costing by ledger
• Parallel Valuation (Group, PC Valuation) will be enabled by Single-Valuation ledgers. No more multi-valuation ledgers
• Settlement rules in CO objects by ledger
• Parallel Accounting using Accounts Approach will be obsolete
• Using Fiori for several processes will become mandatory, as the ledger field will be enabled only in Fiori

UPA is already available in S4C. The first cut of UPA for on-premise will be available in S/4 HANA 2022.

I hope this blog gives you a good insight into the upcoming (massive) changes in SAP Finance and related areas.

I will save the specifics, i.e. Impact on Product Costing, Inventory Accounting, Overhead Accounting & Asset Accounting, for a future blog

Do share your feedback and questions, if any, in the comments !

Thanks for taking out your time to read the blog. Have a blessed one!!



Ajay Maheshwari

Forever-in-love-with-SAP

Okumaya devam et...